What a Million Dollars Will Buy You

By Carin Rubenstein

May 30, 2004

THE house may be selling for more than $1 million, but it's still just a teardown.

The four-bedroom house in Old Greenwich shares a driveway on a barely paved dead-end lane and sits on almost a half-acre. It has partial water views of Greenwich Cove, but the exterior is slightly mildewed and the concrete landings are crumbling. That hardly matters, though, since the $1.725 million dollar home is scheduled to be demolished.

''Sometimes they bring the wrecking ball to the closing,'' said John W.M. Cooke, only half joking, the listing agent for the house and manager of Merritt Associates, a real estate agency in Greenwich.

Right now, in this part of Connecticut, he said, ''One million dollars doesn't buy you much house. I've never seen it like this; it's like Monopoly money.''

Mr. Cooke said one Greenwich home that recently sold for $1.4 million had some unusual qualities, but he admitted ''if you showed that million-dollar house to somebody in Iowa, they'd think you were crazy.''

In a few other communities, including Darien and Westport, $1 million barely buys a starter home. Indeed, a growing number of home buyers in and around lower Fairfield County are entering the million-dollar home market, whether they expect to or not.

Ten years ago, $1 million bought a ''pretty high-end home, but $1 million now is pretty much entry level,'' said Mary Palmieri Gai, a broker at William Raveis in Westport. ''A million buys a tired house on half an acre or less that is waiting to be knocked down,'' she added.

Charlotte Felt, manager of Kelly Associates Real Estate in Darien, said $1 million will buy a four-bedroom colonial style house on half an acre in Darien, while 10 years ago, that much money would have purchased a 16-room home on two acres.

In fact, in the first quarter of 2004, 48 percent of the single-family homes sold in Darien went for more than $1 million, as did 66 percent of those sold in New Canaan. In fact, the average price of single-family homes exceeds $1 million in Greenwich, Westport, Darien and New Canaan.

In Greenwich, the average sale price of single family homes went over $1 million in 1997; the average price in the first quarter of 2004 was $2 million, according to Mr. Cooke. In New Canaan, too, the average price is now $1.9 million; the average price first topped $1 million there in 1999. In both Westport and Darien, the average price of single family homes hit the $1 million mark for the first time in 2002.

Many real estate experts said high prices for single-family homes was due to extraordinarily low interest rates and a historically low level of inventory.

In the early 1990's, not even 1 percent of homes in Fairfield County sold for $1 million or more, said Don Hull, president of the Connecticut Multiple Listing Service, which tracks housing prices in the Fairfield area, excluding Greenwich, Darien and New Canaan. But during the first quarter of 2004, 9 percent of the 1,326 single-family homes sold in 20 towns in Fairfield County went for at least $1 million, he said. With the addition of Greenwich, Darien and New Canaan, that figure rises to 27 percent.

''Ten years ago, a $1 million house was very much a rarity,'' Mr. Hull said. But today, million-dollar plus prices no longer surprise him, he added.

''Real estate values double every seven years, and God hasn't created any more land, so you've got supply and demand,'' Mr. Hull said, in trying to explain the increase in seven-figure home prices.

Yet the National Association of Realtors in Washington, which charts housing sales nationwide, does not even track homes that sell for more than $1 million, since ''it's fewer than 1 percent of transactions,'' said Walter Molony, a spokesman.

With some notable exceptions. In several metropolitan areas nationwide, million dollar homes are becoming commonplace.

In Cambridge, Mass., for example, nearly 12 percent of single-family homes were valued at more than $1 million, as were 7 percent of those in San Francisco and 3 percent of those in Stamford, according to data drawn from the 2000 Census by Zhu Xiao Di, a research analyst at the Joint Center for Housing Studies at Harvard University. Although he did not examine figures for other parts of Connecticut, Mr. Di said that he is not surprised by the large number of million-dollar homes there.

In places where housing demand exceeds supply, and there is little open land to build more, ''one million dollars does not purchase a huge mansion, just a standard thing,'' he said. Mr. Di's study focused on owner-occupied single-family homes and thus excluded New York City's co-ops and condos.

The proportion of million dollar homes, however, varies widely across municipalities in southern Connecticut, as well as across the New York metropolitan region as a whole.

In Greenwich, for instance, 64 percent of the single-family homes sold this year have been for more than $1 million, said Russell Pruner, a partner at Shore and Country Properties in Greenwich. Just across the New York State border, in Rye City, however, 38 percent of the homes sold in 2004 went for more than $1 million, according to George M. Stone, a co-owner of Julia B. Fee Real Estate in Rye. And across the Long Island Sound, in Nassau County, just 6 percent of home sales this year included those selling for more than $1 million, according to the Multiple Listing Service of Long Island.

This wide disparity stems in part from the fact that housing prices have always varied from community to community, but also because of differences in property and income taxes, as well as perceptions about school districts and community prestige.

In towns with a high proportion of million dollar homes, ''you pay for a certain exclusivity, and it's largely land values,'' said John Clapp, a professor of finance and real estate at the University of Connecticut who collects data on real estate statewide.

''You're paying for the neighborhood, the low tax rate, access to work places and recreation, and for the panache,'' he said.

Prices have risen in the New York metropolitan area substantially, ''especially in lower Fairfield County, and especially in terms of income,'' he said. Homes are becoming less affordable in the region as prices increase faster than income, added Mr. Clapp.

Million dollar homes also come with a special Connecticut state tax burden.

While sellers of homes priced below $800,000 pay a real estate conveyance tax of 0.5 percent to the state, those who sell a home for more pay a 1 percent tax, a levy that was enacted in 1989, according to Sarah Kaufman, spokeswoman for the Connecticut Department of Revenue Services in Hartford.

In fiscal 1997-1998, for instance, 1,934 homes in the state sold for more than $800,000, bringing in revenue of $34.1 million, Ms. Kaufman said. By fiscal 2002-2003, that number had increased to 2,740, bringing in $46.5 million.

Many real estate agents in southern Connecticut said even $1 million is not really a standard by which a home becomes truly impressive.

Homes that induce a mild ''wow,'' said Mrs. Gai, sell for at least $2.5 million, but even then, ''brokers have become so jaded that it's the land that makes them say 'wow' and not the house.''

''One million dollars buys a perfectly lovely house, and if that's your dream house, that's your mansion,'' said Barbara Cleary, owner of Barbara Cleary's Realty Guild in New Canaan. But still, she acknowledged that a dream house, or a true mansion, would probably be a newly constructed home that would be priced between $2.5 and $3 million.